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A Framework For Construction Materials Supply

Chain Process in the Local Construction Industry

ﺔﻋﺎﻨﺻ

ﻲﻓ

ءﺎﻨﺒﻟا

داﻮﻣ

ﺪﻳرﻮﺗ

ﺔﻠﺴﻠﺳ

ﺔﻴﻠﻤﻌﻟ

مﺎﻋ

رﺎﻃإ

ﺔﻴﻠﺤﻤﻟا

تاءﺎﺸﻧﻹا

Alaa A. Al-Shorafa

Supervised by:

Prof. Dr. Rifat N. Rustom

Professor of Civil Engineering, the Islamic University of Gaza

A Thesis Submitted in Partial Fulfillment of Requirements for the Degree of Master in Construction Management

م

2009-

ـه

1430

The Islamic University of Gaza

Faculty of Engineering

Higher Studies Deanery

ﺔـﻴﻤﻼـﺴﻹﺍ ﺔﻌﻤﺎـﺠﻟﺍ

ﺓﺯــﻏ

ﺔــــﺴﺩﻨﻬﻟﺍ ﺔـــﻴﻠﻜ

ﻴﻠﻌﻟﺍ ﺕﺎـﺴﺍﺭﺩﻟﺍ ﺓﺩﺎﻤﻋ

ـ

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I

DEDICATION

This thesis is sincerely dedicated

To my beloved parents,

To my wife,

Lovely kids (Dalia, Mohammed, Karim, Deema, and Farah

)

And

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II

Acknowledgement

 

Acknowledgment is due to Islamic University of Gaza for support of this

research.

I wish to express my deepest gratitude to my supervisor Professor Rifat N.

Rustom for his professional advice and guidance to complete this research.

My deep thanks to Dr. Kamalain Shaath and Prof. Adnan Enshassi for their

sincere support and help

I would like to express my thanks to all Contractors who participated in

filling the questionnaire and provided important information for this study.

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III

Table of Content 

DEDICATION ... I 

ACKNOWLEDGEMENT ... II 

TABLE OF CONTENT ... III 

ABSTRACT ... IX  ﺺﺨﻠﻤﻟا ... XI 

CHAPTER 1: INTRODUCTION ... 1 

1.1.  BACKGROUND ... 1 

1.2.  STATEMENT OF THE PROBLEM ... 2 

1.3.  RESEARCH AIM ... 3 

1.4.  RESEARCH OBJECTIVES ... 3 

1.5.  SCOPE AND LIMITATIONS ... 3 

1.6.  SIGNIFICANCE OF THE STUDY ... 4 

1.7.  METHODOLOGY OUTLINE ... 4 

1.8.  THESIS CONTENT ... 4 

CHAPTER 2: LITERATURE REVIEW ... 6 

2.1.  CONSTRUCTION INDUSTRY ... 6 

2.2.  MATERIAL MANAGEMENT IN CONSTRUCTION ... 6 

2.3.  BENEFITS OF THE MATERIALS MANAGEMENT ... 7 

2.4.  SUPPLY CHAIN FUNDAMENTALS ... 7 

2.5.  OBJECTIVES OF SUPPLY CHAIN MANAGEMENT ... 8 

2.6.  SUPPLY CHAIN IN MANUFACTURE ... 8 

2.6.1.  Origin of the Supply Chain Management... 8 

2.6.2.  Concept of the Supply Chain Management ... 9 

2.7.  CONSTRUCTION SUPPLY CHAIN ... 11 

2.7.1.  Characteristics of Construction Supply Chains ... 12 

2.8.  CONSTRUCTION SUPPLY CHAIN MANAGEMENT ... 12 

2.8.1.  AREAS OF FOCUS, AND ROLES OF SUPPLY CHAIN MANAGEMENT IN CONSTRUCTION ... 13 

2.9.  MATERIAL SUPPLY CHAIN PROCESS ... 14 

2.10.  PROBLEMS OF THE CONSTRUCTION SUPPLY CHAINS ... 16 

2.11.  TRADITIONAL CONSTRUCTION SUPPLY CHAIN... 17 

2.12.  SUPPLIER/CONTRACTOR ARRANGEMENTS ... 19 

2.13.  CONSTRUCTION SUPPLY CHAIN INTEGRATION ... 20 

2.13.1.  Partnering ... 21 

2.13.2.  Information and Communication System ... 22 

2.14.  BARRIERS THAT OBSTRUCT INTEGRATION OF CONSTRUCTION SUPPLY CHAIN ... 25 

2.15.  SUMMARY ... 26 

CHAPTER 3: METHODOLOGY ... 28 

3.1.  RESEARCH DESIGN ... 28 

3.2.  LITERATURE REVIEW ... 30 

3.3.  QUESTIONNAIRE DESIGN AND CONTENT ... 30 

3.4.  PILOT STUDY ... 32 

3.5.  RESEARCH POPULATION ... 32 

3.6.  SAMPLE SIZE DETERMINATION ... 33 

3.7.  DATA MEASUREMENT ... 33 

3.8.  VALIDITY OF THE RESEARCH ... 34 

3.8.1.Content Validity of the Ques onnaire ... 35 

3.8.2.Sta s cal Validity of the Ques onnaire ... 35 

3.8.2.1.  Criterion Related Validity ... 35 

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IV

3.9.  RELIABILITY OF THE RESEARCH ... 36 

3.9.1. Half Split Method ... 36 

3.9.2. Cronbach’s Coefficient Alpha ... 37 

3.10.  ONE-SAMPLE KOLMOGOROV-SMIRNOV TEST ... 38 

3.11.  DATA ANALYSIS ... 39 

CHAPTER 4: DATA ANALYSIS AND DISCUSSION... 40 

4.1.  INTRODUCTION ... 40 

4.2.  GENERAL BACKGROUND AND INFORMATION ... 40 

4.2.1.  Company Establishment Year ... 40 

4.2.2.  Company Specialized Sector ... 41 

4.2.3.  Companies Classifications According to the Palestinian Contractor Union ... 41 

4.2.4.  Average Number of Employees within the Last Five Years ... 42 

4.2.5.  Number of Executed Projects within the Last Five Years ... 42 

4.2.6.  Value of the Executed Projects within the Last Five Years ... 43 

4.2.7.  The Person or Section in Charge of Materials Procurement ... 43 

4.3.  CURRENT PRACTICES OF MATERIAL SUPPLY CHAIN PROCESS AND THE IMPORTANT FACTORS THAT FORM IT ... 44 

4.3.1.  Bidding Phase (Estimating, Preparation, Submission and Winning) ... 45 

4.3.2.  Sourcing (Vendor Selection) Phase ... 50 

4.3.3.  Material Procurement Phase ... 54 

4.3.4.  Construction Phase ... 58 

4.3.5.  Post Construction Phase (Surplus Materials) ... 62 

4.3.6.  Evaluation Phase ... 63 

4.3.7.  Information Related to the Current Practices of the Construction Supply Chain Management ... 64 

4.3.8.  Methods Used for Ordering Materials from the Suppliers ... 65 

4.4.  CONTRACTOR /SUPPLIER RELATIONSHIP ... 66 

4.4.1.  Criteria for Selection the Suppliers ... 66 

4.4.2 .   Action Taken Against Late Deliveries and Not Complying With the Required Specifications ... 68 

4.5.  IMPACT OF THE ISRAELI CLOSURE AND POLICIES ON THE CONSTRUCTION MATERIALS SUPPLY CHAIN. ... 70 

4.6.  MITIGATING THE UNCERTAINTIES ASSOCIATED WITH THE CONSTRUCTION INDUSTRY ... 71 

4.6.1.  Buffer Stock ... 71 

4.6.1.1.  Local Materials with Normal Conditions ... 72 

4.6.1.2.  Local Materials with Unstable Conditions ... 73 

4.6.1.3.  Imported Materials with Normal Conditions ... 73 

4.6.1.4.  Imported Materials with Unstable Conditions ... 73 

4.6.2.  Buffer Time ... 74 

4.6.2.1.  Local Materials with Normal Conditions ... 75 

4.6.2.2.  Local Materials with Unstable Conditions ... 75 

4.6.2.3.  Materials need to be Imported in Stable Conditions ... 75 

4.6.2.4.  Materials need to be imported With Unstable Conditions ... 76 

4.7.  PROBLEMS ENCOUNTERING CONTRACTORS THROUGH THE MATERIAL SUPPLY CHAIN PROCESS 76  4.7.1.  Bidding Phase ... 76 

4.7.2.  Sourcing (Vendor Selection) Phase ... 78 

4.7.3.  Material Procurement ... 79 

4.7.4.  Construction Phase ... 81 

4.7.5.  Post-Construction (Surplus materials) Phase ... 83 

4.8.  KEY FACTORS CONTRIBUTING IN INTEGRATING CONSTRUCTION SUPPLY CHAIN ... 84 

CHAPTER 5: MATERIAL SUPPLY CHAIN PROCESS FRAMEWORK ... 89 

5.1.  BIDDING PHASE ... 89 

5.1.1.  Process ... 89 

5.1.2.  Problems Encountered ... 90 

5.1.3.  Key Integrating Factors ... 91 

5.2.  SOURCING PHASE ... 91 

5.2.1.  Process ... 91 

5.2.2.  Problems Encountered ... 92 

5.2.3.  Key Integrating Factors ... 92 

5.2.4.  Decision Node ... 93 

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V

5.3.1.  Process ... 93 

5.3.2.  Problems Encountered ... 94 

5.3.3.  Key Integrating Factors ... 96 

5.3.4.  Decision Node ... 96 

5.4.  CONSTRUCTION PHASE ... 98 

5.4.1.  Process ... 98 

5.4.2.  Problems Encountered ... 99 

5.4.3.  Key Integrating Factors ... 100 

5.4.4.  Decision Node ... 100 

5.5.  POST-CONSTRUCTION PHASE ... 101 

5.5.1.  Process ... 101 

5.5.2.  Problems Encountered ... 101 

5.5.3.  Key Integrating Factors ... 101 

5.5.4.  Decision Node ... 101 

5.6.  EVALUATION PHASE ... 102 

5.7.  GRAPHICAL REPRESENTATION OF THE MATERIAL SUPPLY CHAIN PROCESS ... 102 

5.8.  EVALUATION OF MATERIAL SUPPLY CHAIN PROCESS FRAMEWORK ... 110 

CHAPTER 6: CONCLUSION AND RECOMMENDATION ... 112 

6.1.  CONCLUSION ... 112 

6.2.  RECOMMENDATIONS ... 115 

6.3.  RECOMMENDATIONS FOR FURTHER STUDIES ... 115 

REFERENCES ... 117 

APPENDIX 1:THE QUESTIONNAIRE (IN ARABIC) ... 122 

APPENDIX 2:THE QUESTIONNAIRE (IN ENGLISH) ... 134 

APPENDIX 3:RESULTS OF THE SPEARMAN CORRELATION COEFFICIENTS FOR CRITERION RELATED VALIDITY AND STRUCTURE VALIDITY OF THE QUESTIONNAIRE ... 147 

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VI

List of Tables

Page Table 2.1: Characteristic differences between traditional ways of managing the supply

chain and SCM, (Cooper et al., 1993) mentioned in (Vrijhoef et al., 1999).

10

Table 3.1: Classification of Sample Size 33

Table 3.2: Half Split Method 37

Table 3.3: Cronbach’s Coefficient Alpha 38

Table 3.4: One-Sample Kolmogorov-Smirnov Test 38

Table 4.1: Contracting Companies Establishment Year 40

Table 4.2: Company Specialized Sector 41

Table 4.3: Company Degree of Classifications 42

Table 4.4: Average Number of Employees Within the Last Five Years 42

Table 4.5: Number of Executed Projects within the Last Five Years 43

Table 4.6: Value of Executed Projects within the Last Five Years 43

Table 4.7: Person or Section in Charge of the Material Procurement 44

Table 4.8 : Bidding Process Phase (Estimating, Preparation, Submission and Winning) 45

Table 4.9: Sourcing (Vendor Selection) Process 50

Table 4.10: Material Procurement Process 54

Table 4.11: Construction Process Phase 58

Table 4.12: Post Construction Phase (Surplus Materials) 62

Table 4.13: Assessment Phase Result 63

Table 4.14: Information Related to the Current Practices of the Construction Supply Chain Management Results

65

Table 4.15: Ranking of the Methods of Ordering Materials from the Suppliers 65

Table 4.16: Ranking the Criteria to Select the Supplier 66

Table 4.17: Ranking the Criteria to Select the Supplier (Source: Pheng & Chuan, 2001) 68

Table 4.18: Materials Purchasing Criteria Priorities between 1997 and 1999 68

Table 4.19: Preferred Course of Action Taken Against Late Deliveries and/ or not Complying with the Required Specifications

69 Table 4.20: Preferred Course of Action Taken Against Late Deliveries (Source: Pheng &

Chuan, 2001)

70

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VII

Table 4.22: Preferred (Minimum) Level of Buffer Stocks to Safeguard against Uncertainties

72 Table 4.23: Preferred (Minimum) Level of Buffer Stocks to Safeguard against

Uncertainties

73 Table 4.24: Preferred (minimum) Level of Buffer Time to Safeguard against

Uncertainties

74

Table 4.25: Problems Encountering Contractors during the Bidding Phase 76

Table 4.26: Problems Encountering Contractors during the Sourcing (Vendor Selection) Phase

78

Table 4.27: Problems Encountering Contractors During Material Procurement Phase 79

Table 4.28: Problems Encountering Contractors during Construction Phase 81

Table 4.29: Problems Encountering Contractors during Post-Construction Phase 83

Table 4.30: Factors which may Contribute to Successful Integration of the Construction Supply Chain Process

84

Table 5.1: Problems Encountered During the Bidding Phase and Possible Solutions 90

Table 5.2: Problems Encountered During the Sourcing Phase and Possible Solutions 92

Table 5.3: Sourcing Phase Decision 93

Table 5.4: Problems Encountered During the Procurement Phase and Possible Solutions

94

Table 5.5: Procurement Phase Decisions 97

Table 5.6: Problems Encountered During the Construction Phase and Possible Solutions

99

Table 5.7 : Construction Phase Decisions 100

Table 5.8: Post- Construction Phase Decision 101

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VIII

List of Figures

Page

Figure 2.1 Generic Configuration of a Supply Chain in Manufacturing 9

Figure 2.2 General Structure of construction supply chain 11

Figure 2.3 Problems in CSC 17 

Figure 3.1 Research Methodology Flowchart 29

Figure 5.1.A: Material Supply Chain Process Framework (Bidding Phase) 103

Figure 5.1.B: Material Supply Chain Process Framework (Procurement and Sourcing Phase)

104

Figure 5.1.C: Material Supply Chain Process Framework (Sourcing Phase) 105

Figure 5.1.D: Material Supply Chain Process Framework (Sourcing Phase) 106

Figure 5.1.E: Material Supply Chain Process Framework (Procurement and Construction Phase)

107

Figure 5.1.F: Material Supply Chain Process Framework (Construction Phase) 108

Figure 5.1.G: Material Supply Chain Process Framework (Construction Phase, Post- Construction and Evaluation Phase )

109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IX

Abstract

Materials require special attention while creating a project plan, since it forms a large portion of the total cost of a construction project. Materials are essential for the daily progress of a construction project. The absence of materials when needed is one of the main

causes of loss of productivity in a jobsite. Current materials management practices in the

construction industry are performed on fragmented basis with unstructured communication and no clearly established responsibilities between the parties involved. The highly fragmentation is a result of the separation of design and construction, lack of coordination and integration between various functional disciplines, poor communication, etc. All of theses are the important factors causing performance-related problems such as delay in material ordering and receiving, low productivity, cost and time overrun, conflict and disputes.

The aim of this research is to develop a framework for the best practice of material supply chain process through the project phases that suits the local construction industry in order to help contractors to have the right materials in the right quantities (at the right place) at the right moment at minimal cost. This will assist contractors to improve their productivity, minimize losses and increase competitiveness. To realize the research aim, a survey questionnaire was used to achieve the following objectives: exploring the current practices of material supply chain process, identifying the important activities that form the material supply chain process, studying the contractor/ supplier relationship, studying the impact of the Israeli closure of the Gaza Strip on the material supply chain process, providing solution to the risks and uncertainties inherent in the construction industry, identifying the most occurred problems facing the contractors through the project phases and finally identifying the key factors that may contribute in integrating the phases of the material supply chain process. Eighty one questionnaires were distributed to the contractors of first, second and third class. Fifty questionnaires were received back and analyzed.

The important result of this study is developing Material Supply Chain Process Framework. The framework consists of six phases which are: bidding phase, sourcing phase, procurement phase, construction phase, post construction phase and evaluation phase. Each phase involves a set of activities that should be viewed as integrated activities rather than a series of separated ones. The study reveals that contractor/supplier relationship is based on

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X

project by project basis. Most of the contractors do not form long term agreement or partnership with the suppliers. Competitive pricing is the most important criteria adopted for selection of the suppliers and it is primarily based on the lowest price. The study shows that different level of minimum buffer stocks and buffer time were advocated by the respondents to mitigate the uncertainties inherent in the construction setting and the problem of Israeli closure to the borders of the Gaza Strip. The problems that may hamper the smooth application of the material supply chain process through project phases were identified and possible solutions for these problems were provided. Poor communication among the parties involved is the common problem occurred in each phase of the material

supply chain process. Finally, the study reveals that understanding the client needs and

objectives by the contractors, subcontractors and suppliers and committing to these needs and objectives, establishing a protocol for dealing effectively with disputes and problems that may arise between the project participant during the course of project implementation and establishing a system among the project participants for communication and share project information in timely and accurate manner are the most key factors that contribute in integrating the project phases and the project participants.

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XI

ﺺﺨﻠﻤﻟا

ﺐ ﻠﻄﺘﺗ داﻮ ﻤﻟا ﺎ ﻣﺎﻤﺘها ﺔ ﻴﻟﺎﻤﺟﻹاعوﺮ ﺸﻤﻟاﺔ ﻔﻠﻜﺗﻦ ﻣةﺮ ﻴﺒآﺔﺒ ﺴﻧﻞﻜ ﺸﺗﺎ ﻬﻧﻷعوﺮ ﺸﻤﻠﻟﻂﻴ ﻄﺨﺘﻟاﺪ ﻨﻋًﺎ ﺻﺎﺧ ﺎ ﻬﻧأﺎ ﻤآ، ﻲﻣﻮﻴﻟاجﺎﺘﻧﻺﻟﺔﻳروﺮﺿ . ﻊ ﻗﻮﻤﻟاﻲ ﻓﺔ ﻴﺟﺎﺘﻧﻹاضﺎ ﻔﺨﻧﻻﺔﻴﺳﺎﺳﻷابﺎﺒﺳﻷاﺪﺣأﻮهﺎﻬﻴﻟإﺔﺟﺎﺤﻟاﺪﻨﻋداﻮﻤﻟاﺮﻓﻮﺗمﺪﻋنإ . ﺎﺤﻟاداﻮ ﻤﻟاةرادإتﺎ ﺳرﺎﻤﻣﻢﺘ ﺗ ﻦﻴ ﺑتﻻﺎ ﺼﺗﻻانأﺚ ﻴﺣ،ﻂﺑاﺮ ﺘﻣﺮ ﻴﻏوأﺰ ﺠﻣسﺎ ﺳأﻰ ﻠﻋتاءﺎ ﺸﻧﻹاﺔﻋﺎﻨ ﺻﻲ ﻓﺔ ﻴﻟ ﺎﻴﻟوﺆ ﺴﻤﻟانأﺎ ﻤآ،ﺔﻔﻴﻌ ﺿعوﺮ ﺸﻤﻟاﺬ ﻴﻔﻨﺗﻲ ﻓﺔآرﺎ ﺸﻤﻟاﺔﻴ ﺳﺎﺳﻷافاﺮ ﻃﻷا ت ﺔﺤ ﺿاوﺮ ﻴﻏفاﺮ ﻃﻷاﻩﺬ هﻦﻴ ﺑ . ﻦ ﻣنإ ﻨﺘﻟاﺔﻠﺣﺮﻣﻦﻋﻢﻴﻤﺼﺘﻟاﺔﻠﺣﺮﻣﻞﺼﻓﻰﻟإﻊﺟﺮﻳﻂﺑاﺮﺘﻟامﺪﻋوﺔﺋﺰﺠﺘﻟاﻩﺬﻬﻟﺔﻴﺳﺎﺳﻷابﺎﺒﺳﻷا ﻖﻴﺴﻨﺘﻟاﻒﻌﺿ،ﺬﻴﻔ جﺎﻣﺪﻧﻻاو تﺎﺼﺼﺨﺘﻟاﻒﻠﺘﺨﻣﻲﻓﺔآرﺎﺸﻤﻟافاﺮﻃﻹاﻦﻴﺑ . ﺔ ﻣﺎﻬﻟاﻞﻣاﻮﻌﻟاﻩﺬهﻊﻴﻤﺟ تدأ ﺮﻴﺧﺄ ﺘﻟاﻞ ﺜﻣءادﻷاﻲ ﻓةﺮ ﻴﺒآﻞآﺎ ﺸﻣﻰ ﻟإ تﺎﻋاﺰﻨﻟاوتﺎﻓﻼﺨﻟا،ﻊﻳرﺎﺸﻤﻟازﺎﺠﻧإﻲﻓﺮﻴﺧﺄﺘﻟا،ﺔﻔﻠﻜﺘﻟاةدﺎﻳز،ﺔﻴﺟﺎﺘﻧﻹاضﺎﻔﺨﻧا،داﻮﻤﻟامﻼﺘﺳاوﺐﻠﻃﻲﻓ . ﻰ ﻟإﺔﺳارﺪﻟاﻩﺬهﻒﻬﺗ ةرادإﺎ ﻬﻟﻼﺧﻦ ﻣﻦ ﻜﻤﻳﺔ ﻘﻳﺮﻃﻞ ﻀﻓﻷمﺎ ﻋرﺎ ﻃإﺮﻳﻮ ﻄﺗ ﺔ ﻴﻠﻤﻋ ﻞ ﺣاﺮﻣلﻼ ﺧداﻮ ﻤﻟاﺪ ﻳرﻮﺗﺔ ﺴﻠﺳ داﻮ ﻤﻟاﺪ ﻳرﻮﺗﻰ ﻠﻋﻦﻴﻟوﺎ ﻘﻤﻟاةﺪﻋﺎ ﺴﻣﻞ ﺟاﻦ ﻣﻚ ﻟذوةﺰ ﻏعﺎ ﻄﻗﻲ ﻓتاءﺎ ﺸﻧﻹاﺔﻋﺎﻨ ﺻﻊ ﻣمءﻼﺘ ﺗﺔ ﻔﻠﺘﺨﻤﻟاعوﺮ ﺸﻤﻟا ﻨﻤﻟاﺖ ﻗﻮﻟاﻲ ﻓ،ﺐ ﺳﺎﻨﻤﻟانﺎ ﻜﻤﻟاﻲ ﻓ،ةدﺪﺤﻤﻟاتﺎﻴﻤﻜﻟﺎﺑ،ﺔﺑﻮﻠﻄﻤﻟاتﺎﻔﺻاﻮﻤﻟﺎﺑ رﺎﻌ ﺳﻷاﻞ ﻗﺄﺑوﺐ ﺳﺎ . فﺪ ﻬﻟااﺬ هﻖ ﻴﻘﺤﺘﻟ فاﺪهﻷاﻖﻴﻘﺤﺘﻟﺔﻧﺎﺒﺘﺳﻹابﻮﻠﺳأماﺪﺨﺘﺳاﻢﺗ مﺎﻌﻟا ﺔﻴﻋﺮﻔﻟا ﺔﻴﻟﺎﺘﻟا : ﺔ ﻴﻟﺎﺤﻟاتﺎﺳرﺎﻤﻤﻟاﺔﺳارد ﺔ ﻴﻠﻤﻌﻟ ،داﻮ ﻤﻟاﺪ ﻳرﻮﺗﺔﻠ ﺴﻠﺳ ﺮ ﺛأﺔ ﺳارد،ﻦﻳدرﻮ ﻤﻟاوﻦﻴﻟوﺎ ﻘﻤﻟاﻦﻴ ﺑﺔ ﻗﻼﻌﻟاﺔ ﺳارد،داﻮ ﻤﻟاﺪ ﻳرﻮﺗﺔﻠ ﺴﻠﺳﻞﻜ ﺸﺗﻲ ﺘﻟاﺔ ﻣﺎﻬﻟادﻮ ﻨﺒﻟاﺪ ﻳﺪﺤﺗ ﻟا تﺎ ﺳﺎﻴﺴ ﻴﻠﻴﺋاﺮﺳﻹا ﺔ تاءﺎ ﺸﻧﻹاﺔﻋﺎﻨ ﺻﻲ ﻓﺔ ﻨﻣﺎﻜﻟاﺮﻃﺎ ﺨﻤﻠﻟلﻮﻠﺤﻟاﺾﻌﺑﻢﻳﺪﻘﺗ،داﻮﻤﻟاﺪﻳرﻮﺗﺔﺴﻠﺳﻰﻠﻋ ، ﺮ ﺜآﻷاﻞآﺎ ﺸﻤﻟاﺪ ﻳﺪﺤﺗ لﻼﺧًﺎﺛوﺪﺣ ﺔﻴﻠﻤﻋ رﻮﺗﺔﻠﺴﻠﺳ ﻞﻣاﻮﻌﻟاﺪﻳﺪﺤﺗًاﺮﻴﺧأوداﻮﻤﻟاﺪﻳ عوﺮ ﺸﻤﻟاﻞﺣاﺮﻣﺞﻣدﻲﻓﻢهﺎﺴﺗنأﻦﻜﻤﻳﻲﺘﻟاﺔﻴﺳﺎﺳﻷا و ﺔﻴﺳﺎﺳﻷافاﺮﻃﻷاﺞﻣدﻚﻟﺬآ عوﺮﺸﻤﻟاﻲﻓﺔآرﺎﺸﻤﻟا . ﻊﻳزﻮﺗﻢﺗ 81 ﻪﻧﺎﺒﺘﺳا ﻢ ﺗﺪ ﻗوﺔ ﺜﻟﺎﺛوﺔ ﻴﻧﺎﺛ،ﻰﻟوأﺔﺟردﻦﻴﻟوﺎﻘﻣﻰﻠﻋ ﻊﻤﺟ 50 ﺔﻧﺎﺒﺘﺳا . ةرادﻹمﺎﻋرﺎﻃإﺮﻳﻮﻄﺗﻮهﺚﺤﺒﻟا اﺬﻬﻟﺔﻣﺎﻬﻟا ﺞﺋﺎﺘﻨﻟاﻦﻣ ﺔ ﻴﻠﻤﻋ ﻦ ﻣنﻮ ﻜﺘﻳيﺬ ﻟاوداﻮ ﻤﻟاﺪ ﻳرﻮﺗﺔﻠ ﺴﻠﺳ 6 ﻲ هوﻞ ﺣاﺮﻣ : ﺮﺸﻟاﺔﻠﺣﺮﻣ،درﻮﻤﻟارﺎﻴﺘﺧاﺔﻠﺣﺮﻣ،ﺮﻴﻌﺴﺘﻟاﺔﻠﺣﺮﻣ ﻢﻴﻴﻘﺘﻟاﺔﻠﺣﺮﻣوﺬﻴﻔﻨﺘﻟاﺔﻠﺣﺮﻣ،ءا . يﻮﺘﺤﺗ ﻞ ﺣاﺮﻤﻟاﻩﺬ هﻦ ﻣﺔ ﻠﺣﺮﻣﻞآ دﺮﻔﻨﻣسﺎﺳأﻰﻠﻋﺲﻴﻟوﻲﻠﻣﺎﻜﺗﻞﻜﺸﺑﺎﻬﻌﻣﻞﻣﺎﻌﺘﻟاﺐﺠﻳﻲﺘﻟاﺔﻄﺸﻧﻷاﻦﻣﺔﻋﻮﻤﺠﻣﻰﻠﻋ . ﺖ ﻨﻴﺑ ﻩﺬ ه ﺔ ﻗﻼﻌﻟانﺄ ﺑﺔ ﺳارﺪﻟا ﻷانأﺎ ﻤآ،ﺔآاﺮ ﺸﻟاوﺔﻳراﺮﻤﺘ ﺳﻻاسﺎ ﺳأﻰ ﻠﻋﺖ ﺴﻴﻟوعوﺮ ﺸﻤﻟاﻰ ﻠﻋﺔ ﻴﻨﺒﻣدرﻮ ﻤﻟاولوﺎ ﻘﻤﻟاﻦﻴ ﺑ ﻲ هﺔﻴ ﺴﻓﺎﻨﺘﻟارﺎﻌ ﺳ رﺎﻌ ﺳﻷاﻞ ﻗأرﺎﻴﺘﺧاﻰﻠﻋﺔﺴﺳﺆﻣﻲهوﻦﻳدرﻮﻤﻟارﺎﻴﺘﺧﻻﺔﻌﺒﺘﻤﻟاﺔﻘﻳﺮﻄﻟا . نﺄ ﺑﺔ ﺳارﺪﻟاﺖﺤ ﺿوأﺎ ﻤآ كﺎ ﻨه فﻼﺘ ﺧا ﻦﻴ ﺑ تاءﺎ ﺸﻧﻹاﺔﻋﺎﻨ ﺻﻲﻓﺔﻨﻣﺎﻜﻟاﺮﻃﺎﺨﻤﻟاﻦﻣﻒﻴﻔﺨﺘﻠﻟداﻮﻤﻟاﺐﻠﻄﻟﻞﺜﻣﻷاﺖﻗﻮﻟاوﻦﻳﻮﺸﺘﻠﻟﻰﻠﺜﻤﻟاﺔﻴﻤﻜﻟاﺪﻳﺪﺤﺗﻲﻓﻦﻴﻟوﺎﻘﻤﻟا اﺮﺳﻹاتﺎﻗﻼﻏﻹاو ﺮﺑﺎ ﻌﻤﻠﻟﺔﻴﻠﻴﺋ . ًاراﺮ ﻜﺗﺮ ﺜآﻷاﻞآﺎ ﺸﻤﻟاﺪ ﻳﺪﺤﺗًﺎ ﻀﻳأﺔ ﺳارﺪﻟاﻩﺬ هﺞﺋﺎ ﺘﻧﻦ ﻣ ﻖ ﻴﺒﻄﺗﻖ ﻴﻌﺗنأﻦ ﻜﻤﻳﻲ ﺘﻟا داﻮﻤﻟاﺪﻳرﻮﺗﺔﻠﺴﻠﺳﺔﻴﻠﻤﻋ . تﻻﺎ ﺼﺗﻻاﻒﻌ ﺿﻮ هعوﺮ ﺸﻤﻟاﻞ ﺣاﺮﻣلﻼﺧُﺎﺛوﺪﺣﻞآﺎﺸﻤﻟاﺮﺜآأنﺄﺑﺔﺳارﺪﻟاﺖﺤﺿوأﺪﻗو عوﺮﺸﻤﻟاﻲﻓﺔآرﺎﺸﻤﻟافاﺮﻃﻷاﻦﻴﺑ . ﻩﺬ ﻬﻟﺔﻣﺎﻬﻟاﺞﺋﺎﺘﻨﻟاﻦﻣو ﻲ ﺘﻟاﺔ ﺳارﺪﻟا ﻲ ﺘﻟاﻞ ﻣاﻮﻌﻟاﺪ ﻳﺪﺤﺗﻮ ه ﻲ ﻓﻢهﺎ ﺴﺗنأﻦ ﻜﻤﻳ ﺬ ﻴﻔﻨﺘﻟاﻲ ﻓﺔآرﺎ ﺸﻤﻟاﺔﻴ ﺳﺎﺳﻷافاﺮ ﻃﻷاﻚﻟﺬ آوعوﺮ ﺸﻤﻟاﻞ ﺣاﺮﻣﺞﻣد . نأﺔ ﺳارﺪﻟاﺖﺤ ﺿوأﺪ ﻗو ﻲﻟوﺎ ﻘﻣ،لوﺎ ﻘﻤﻟاﻢ ﻬﻓ فاﺪ هﻷاﻩﺬهﻖﻴﻘﺤﺗﻰﻠﻋﻞﻤﻌﻟاو ماﺰﺘﻟﻻاﻢﺛﻦﻣوعوﺮﺸﻤﻟاﻦﻣﻚﻟﺎﻤﻟافاﺪهأوتﺎﺟﺎﻴﺘﺣﻻﻦﻳدرﻮﻤﻟاوﻦﻃﺎﺒﻟا ، مﺎ ﻈﻧءﺎ ﺸﻧإ ﺘﻟاتﺎﻓﻼﺨﻟاوﻞآﺎﺸﻤﻟاﻊﻣﺔﻴﻠﻋﺎﻔﺑﻞﻣﺎﻌﺘﻠﻟ ﻳﻲ عوﺮ ﺸﻤﻟاﺬ ﻴﻔﻨﺗﺔ ﻠﺣﺮﻣلﻼ ﺧﺔآرﺎ ﺸﻤﻟافاﺮ ﻃﻷاﻦﻴ ﺑﺄﺸﻨﺗنأﻦﻜﻤ و ءﺎ ﺸﻧإ ﺢﻴﺤﺻولﺎﻌﻓﻞﻜﺸﺑ عوﺮﺸﻤﻟﺎﺑﺔﻘﻠﻌﺘﻤﻟاتﺎﻣﻮﻠﻌﻤﻟالدﺎﺒﺗو،لﺎﺼﺗﻼﻟمﺎﻈﻧ ﺞﻣدﻲﻓﻢهﺎﺴﺗنأﻦﻜﻤﻳﻲﺘﻟاﻞﻣاﻮﻌﻟاﺮﺜآأﻲه ﻚﻟﺬآوعوﺮﺸﻤﻟاﻞﺣاﺮﻣ ﺟﻦﻴﺑ عوﺮﺸﻤﻟﺎﺑﺔآرﺎﺸﻤﻟافاﺮﻃﻷاﻊﻴﻤ .

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Chapter 1: Introduction

1.1. Background

Supply Chain Management (SCM) is a concept originating from the supply system by which Toyota was seen to coordinate its supplies and manages its suppliers. The basic concept of the SCM includes tools like Just-In-Time (JIT) and logistics management. The current concept of the SCM is somewhat broader but still largely dominated by logistics (Vrijhoef and Koskela, 1999).

SCM deals with the management of materials and information resources across a network of organizations that are involved in the design and the production process. It recognizes the inter-connection between materials and information resources within and across the organization boundaries and seeks systematic improvement in the way these resources are structured and controlled (Trucker and Mohammed, 2001). The objective of supply chain management is to be able to have the right products in the right quantities at the right place at the right moment at minimal cost.

Construction Supply Chain (CSC) is all the construction process, from the demands by the client, conceptual design, construction and maintenance and organizations, which are involved in the construction process, such as owner, designer, general contractors, subcontractors, suppliers, consultants, etc. CSC is not a chain of construction business with business-to-business relationships but a network of multiple organizations and relationships, which includes the flow of information, the flow of material services or products, and the flow of funds between client, designer, contractor and supplier (Xue, et al., 2007).

The focus and attention in this research are given to the materials since it forms a large portion of the total cost of a construction project. In addition, materials are essential for the daily progress of a construction project. The absence of materials when needed is one of the main causes of loss of productivity in a jobsite. Therefore, contractors have to manage their materials efficiently to lower cost in order to remain in business. They should select reputable suppliers, tracking the materials to identify when materials need to be ordered based on the actual usage of materials on site and progress of the work,

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dealing on site with materials handling, storage, misplacement and handling of materials surplus.

1.2. Statement of the Problem

Current materials management practices in the construction industry are performed on fragmented basis with unstructured communication and no clearly established responsibilities between the parties involved. The highly fragmentation is a result of the separation of design and construction, lack of coordination and integration between various functional disciplines, poor communication, etc. Furthermore, dependency of the general contractors on other parties such as suppliers and subcontractors reinforces the construction industry fragmentation. All of theses are the important factors causing performance-related problems such as delay in material ordering and receiving, low productivity, cost and time overrun, conflict and disputes.

This research investigates current material management practices and develops Material Supply Chain Process (MSCP) that suits the local construction industry. The investigation considered all the activities starting with the estimating process and ending up with surplus materials at the end of the project. The supplier / contractor relationship was studied. The problems encountering the contractors during MSCP were documented. Furthermore, the investigation included the factors that may contribute in integrating the MSCP.

Still, there are many challenges facing contractors during various phases of the MSCP. During the bidding stage, contractor may decide to reduce the cost in order to win the contract; such decision will affect the subsequent phases of the MSCP. During the sourcing phase, the selection of a reputable supplier is critical for ensuring that materials are delivered in quantities needed at the specified time. During the procurement phase, contractors face many decisions that related to "when to order materials", "when to buy materials" and "how much to buy" . During the construction phase, contractors have the challenge to choose the best location for delivering the material. Finally, contractors have to decide how to deal with surplus material at the end of the project at the post-construction phase.

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1.3. Research Aim

The aim of this research is to develop a framework for the best practice of material supply chain process through the project phases that suits the local construction industry in order to help contractors to have the right materials in the right quantities (at the right place) at the right moment at minimal cost so they can improve their productivity, minimize losses and increase competitiveness.

1.4. Research Objectives

The aim of this research was realized through the following objectives:

1. To investigate the current practices of the MSCP in the local construction

industry

2. To determine the important activities that form the phases of MSCP

3. To study the contractor/supplier relationship

4. To explore the impact of the Israeli closure on the MSCP

5. To provide solution to uncertainties and risks inherent in MSCP

6. To identify the most occurred problems facing contractors in the MSCP through

the project phases, to diagnose the root causes of them and to develop possible solutions for them

7. To study key factors that may contribute in integrating the phases of MSCP

1.5. Scope and Limitations

The proposed research will be limited to the following assumptions:

The research will focus on contracting companies classified as first class, second

class and third class

.

• The focus of this research is on the material supply chain process from the main

contractor's perspective, as the questionnaire is addressed only to the construction contractors in the Gaza Strip. Clients and suppliers are not included.

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1.6. Significance of the Study

The framework is significant in several ways. First, the framework identifies and describes all phases of the MSCP starting from bidding, sourcing, procurement, construction, post-construction and ending with evaluation. Second, the framework presents solutions to the uncertainties and risk inherent in the MSCP. Third, the framework documents the problems encountering the contractors through the MSCP and providing possible solutions to the most occurred ones. Finally, the framework identifies the factors that contribute in integrate the MSCP.

1.7. Methodology Outline

The research was conducted in four main stages. The first stage included identifying the research problem, setting out the dissertation's aim and objectives and developing the research plan. The second phase included reviewing the literature related to supply chain management and construction supply chain management. The third phase was developing a questionnaire to investigate the factors that form the material supply chain process, the criteria that contractors consider to select and suppliers, the factors that could help in mitigating the risks and uncertainties inherent in the material supply chain process, the problems encountering the contractors through the material supply chain process and the factors that may contribute in integrating the phases of the material supply chain process. Statistical analysis for questionnaires was done by using Statistical Package for the Social Sciences (SPSS). Discussion for the obtained results was also made. The fourth phase was developing the MSCP based on the results obtained from the field survey and literature review. Finally, conclusions of research and recommendations were then drafted.

1.8. Thesis Content

This dissertation is divided into six chapters: Background, Statement of the Problem, Significance of the Study and Objectives of the Study are introduced and discussed in Chapter One. Literature related to the concept of supply chain management and construction supply chain management is reviewed in Chapter Two. Chapter Three describes the research methodology. Chapter Four shows the results and discussion of the survey. Results are presented in eight main parts:

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• Current practices of the materials supply chain process and important activities that forming it

• Contractor / supplier relationship

• Impact of Israeli closure on the materials supply chain process

• Factors considered to mitigate uncertainties and risks inherent in the material supply chain process

• Most occurred problems encountering the contractors in the materials supply chain process

• Key factors that integrate the material supply chain process.

Chapter Five presents material supply chain process framework. Finally, Chapter Six contains the conclusion and recommendations.

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Chapter 2: Literature Review

2.1. Construction Industry

The construction industry in general is highly fragmented with significant negative impacts perceived low productivity, cost and time overruns, conflicts and disputes, and

resulting claims and time-consuming litigation. These have been acknowledged as the

major causes of performance-related problems facing the industry. The legacy of this high

level offragmentation is that the project delivery process is considered highly inefficient

incomparison with other industry sectors (Trucker et al, 2001).The construction industry

has numerous problems because of its complicated nature of operation. This industry is comprised of a multitude of occupations, professions and organizations (Milakovich, 1995). They are involved in the different phases of a construction project, which, according to Schultzel and Unruh (1996), include: feasibility, development, finance, concept development and review, estimate, detailed engineering, procurement, construction and start-up. The client, consultants, contractor and sub-contractors of a construction project all have a role to play in delivering a quality project. Failure of any of the parties will seriously affect the quality of the final project. Moreover, the parties have different objectives which keep them apart. Rowlinson and Walker (1995) point out that the construction industry is also characterized by its non-standardization. Production processes are to some extent different from each other. Hence, no universal standard or specification can be applied to the product, which leads to difficulties in quality assurance. Moreover, excessive changes to the details of the design of a project are typical throughout the construction process. They may be the result of the lack of buildability of the design produced or variations by the contractors for the sake of speed and cost of production. Rowlinson and Walker (1995) further added, quality is often at risk because of the excessive changes. As a result of the changes, delays in completion of the construction project and claims by different parties to the project often occur. Hence, the relationship between the parties tends to be confrontational.

2.2. Material Management in Construction

Efficient management of materials plays a key role in the successful completion of a project. The control of materials is a very important and vital subject for every company and should be handled effectively for successful completion of a project. Materials

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account for a big part of project cost. Some studies concluded that materials account for around 50%-60% of the project cost (Bernold and Treseler, 1991).

Different authors define the concept of materials management in different ways.

However, allthe researchers point out that materials management is extremely important

for a successfulproject completion. The basic idea behind materials management is that

the materials and/orequipment needed, in the quantities needed, meeting the standards of

quality specified, areobtained at a reasonable cost and are available when needed on the

construction site. The process of materials management should integrate purchasing,

expediting, and inventory control. A well managed materials management system can

contribute to the costeffectiveness of a project (Perdomo, 2004).

2.3. Benefits of the Materials Management

An effective material management system can bring many benefits for a company. Previous studies by the Construction Industry Institute (CII) concluded that labor productivity could be improved by six percent and can produce 4-6% additional savings (Bernold and Treseler, 1991). Among these benefits are:

• Reducing the overall costs of materials

• Better handling of materials

• Materials will be on site when needed and in quantities required

• Improvement in labor productivity

• Improvement in project schedule

• Better relation with suppliers

• Reduce of surplus materials

• Reduce storage of materials on site

• Labor savings

• Stock reduction

2.4.Supply Chain Fundamentals

There are many definitions for the supply chain (SC) and there seems to be a universal agreement on what a supply chain is (Teigen, 1997). Lee et al. (1995) define a SC to be a network of facilities that procure raw materials, transform them into intermediate goods

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and then final products, and deliver the products to customers through a distribution system. Swaminathan et al. (1996) has a similar definition: a network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products. Ganeshan et al. (1995) has yet another analogous definition: SC is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the

distribution of these finished products to customers.

2.5. Objectives of Supply Chain Management

The objective of supply chain management (SCM) is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost. More precisely, the objective can be translated into more precise areas of concern, which are: flexibility, delivery reliability, delivery, time/lead time and inventory level. Delivery reliability and delivery times are both aspects of customer service, which is highly dependent on flexibility and on inventory (Teigen, 1997).

2.6. Supply Chain in Manufacture

The concept of the SC is addressed here as it was initially developed and used in manufacturing industries.

2.6.1. Origin of the Supply Chain Management

SCM is a concept that has originated and flourished in the manufacturing industry. The first signs of SCM were perceptible in the JIT delivery system as part of the Toyota Production System (Shingo 1988). This system aimed to regulate supplies to the Toyota motor factory just in the right - small - amount, just on the right time. The main goal was to decrease inventory drastically, and to regulate the suppliers’ interaction with the production line more effectively. After its emergence in the Japanese automotive industry as part of a production system, the conceptual evolution of SCM has resulted in an autonomous status of the concept in industrial management theory, and a distinct subject of scientific research, as discussed in literature on SCM (Bechtel and Yayaram 1997,

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Cooper et al. 1997). Along with original SCM approaches, other management concepts (e.g., value chain, extended enterprise) have been influencing the conceptual evolution towards the present understanding of SCM. In a way, the concept of SCM represents a logical continuation of previous management developments (Van der Veen and Robben 1997). Although largely dominated by logistics, the contemporary concept of SCM encompasses more than just logistics (Cooper et al. 1997). Actually, SCM is combining particular features from concepts including Total Quality Management (TQM), Business Process Redesign (BPR) and JIT (Van der Veen and Robben 1997).

2.6.2. Concept of the Supply Chain Management

The supply chain has been defined as ‘the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer’ (Christoph,1992).

Figure 2.1 Generic Configuration of a Supply Chain in Manufacturing (Christopher, 1992).

Figure 2.1 shows a generic configuration of supply chain in manufacturing, with information flows (such as orders, schedules, forecasts), circulating between customers, retailers, assemblers, manufacturers and suppliers. Material flows (as supplies, production, deliveries, and products of whatever kind) circulate from their manufacturing from raw materials or components, through to their use within the manufactured product. SCM looks across the entire supply chain (Figure 2.1), rather than just at the next entity

or level, and aims to increase transparency and alignment of the supply chain’s

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and Ellram 1993). According to Cooper and Ellram (1993), the shift from traditional

ways of managing the supply chain towards SCM includes various elements (Table 2.1).

The traditional way of managing (Table 2.1) is essentially based on a conversion (or transformation) view on production, whereas SCM is based on a flow view of production. The conversion view suggests that each stage of production is controlled independently, whereas the flow view focuses on the control of the total flow of production (Koskela 1992).

Table 2.1: Characteristic differences between traditional ways of managing the supply chain and SCM, (Cooper et al., 1993) cited in (Vrijhoef et al., 1999).

Element

Traditional management Supply chain management

Inventory management

approach Independent efforts Joint reduction of channel Inventories

Total cost approach Minimize firm costs Channel-wide cost

efficiencies

Time horizon Short term Long term

Amount of information

sharing and monitoring Limited to needs of current transaction As required for planning andmonitoring processes Amount of coordination

of multiple levels in the channel

Single contact for the transaction

between channel pairs

Multiple contacts between levels in firms and levels of channel

Joint planning Transaction-based Ongoing

Compatibility of corporate

philosophies

Not relevant Compatibility at least for

key

relationships

Breadth of supplier base Large to increase

competition and spread risks

Small to increase coordination

Channel leadership Not needed Needed for coordination

focus Amount of sharing risks

and rewards

Each on its own Risks and rewards shared

over the long term Speed of operations, information and inventory levels. Warehouse” orientation (storage, safety stock) interrupted by barriers to flows; localized to channel pairs. “Distribution center” orientation (inventory velocity)

interconnecting flows; JIT, quick response across the channel.

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2.7. Construction Supply Chain

Construction is a multi-organization process, which involves owner, designer, contractor supplier, consultant, etc. It is also a multi-stage process, which includes conceptual, design, construction, maintenance, replacement. From this point of view, Construction Supply Chain (CSC) is all the construction process, from the demands by the client, conceptual, design, construction and maintenance and organizations, which are involved in the construction process, such as owner, designer, general contractors, subcontractors, suppliers, consultants, etc. CSC is not a chain of construction business with business-to-business relationships but a network of multiple organizations and relationships, which includes the flow of information, the flow of materials services or products, and the flow of funds between client, designer, contractor and supplier, as shown in figure 2.2 (Xue, et al., 2007).

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2.7.1. Characteristics of Construction Supply Chains

In terms of structure and function, the CSC is characterized by the following elements (Vrijhoef et al., 2000):

• It is a converging supply chain directing all materials to the construction site

where the object is assembled from incoming materials. The « construction factory » is set up around the single product, in contrast to manufacturing systems where multiple products pass through the factory, and are distributed to many customers.

• It is, apart from rare exceptions, a temporary supply chain producing one-of

construction projects through repeated reconfiguration of project organizations. As a result, the construction supply chain is typified by instability, fragmentation, and especially by the separation between the design and the construction of the built object.

• It is a typical make-to-order supply chain, with every project creating a new

product or prototype. There is little repetition, again with minor exceptions. The process can be very similar, however, for projects of a particular kind.

2.8. Construction Supply Chain Management

Agapiou et al (1998) noted that no studies have defined what is SCM in the construction process. However, based on the understanding of SCM, Construction Supply Chain Management (CSCM) can be defined as: the integration of key construction business processes, from the demands of client, design to construction, and key members of construction supply chain, including client/owner, designer, contractor, subcontractor and supplier. CSCM focuses on how firms utilize their suppliers’ processes, technology and capability to enhance competitive advantage. It is a management philosophy that extends traditional intra-enterprise activities by bringing trading partners together with the common goal of optimization and efficiency. CSCM emphasizes on long-term win-win, cooperative relationships between stakeholders in systemic perspective. Its ultimate goal is to improve construction performance and add client value at less cost (Xue, et al., 2007). Trucker et al. (2001) define the CSCM as the strategic management of information flow, tasks and process, involving various networks of organizations and linkages (upstream and downstream), through out a project life cycle. The upstream activities

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within construction in relation to the position of a main contractor, consists of the activities and tasks leading to the preparation of the production on site involving construction clients and design teams. The downstream consists of activities and tasks in the delivery of construction product involving construction suppliers, subcontractors, and specialist contractor interrelating with the main contractor.

2.8.1. Areas of Focus, and Roles of Supply Chain Management in Construction

Vrijhoef & Koskela (2000) identified four major roles of or level of implementation of SCM, dependent on whether the focus is on the supply chain, the construction site, or both. One or several SC participants could lead each level of implementation. The roles or level of implementation are not mutually exclusive, but are often used jointly.

1. The focus may be on the impacts of the supply chain on site activities. The goal is

to reduce costs and duration of site activities. In this case, the primary consideration is to ensure dependable material and labor flows to the site to avoid disruption to the workflow. This may be achieved by simply focusing on the relationship between the site and direct suppliers. The contractor, whose main interest is in site activities, is in the best position to adopt this focus.

2. The focus may be on the supply chain itself, with the goal of reducing costs,

especially those relating to logistics, lead-time and inventory. Material and component suppliers may also adopt this focus.

3. The focus may be on transferring activities from the site to earlier stages of the

supply chain. This rationale may simply be to avoid the basically inferior conditions on site, or to achieve wider concurrency between activities, which is not possible with site construction with its many technical dependencies. The goal is again to reduce the total costs and duration. Suppliers or contractors may initiate this focus.

4. The focus may be on the integrated management and improvement of the supply

chain and the site production. Thus, site production is subsumed into SCM. Clients, suppliers or contractors may initiate this focus. The focus here is on the supply chain of a main contractor.

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2.9. Material Supply Chain Process

Perdomo (2004) developed a conceptual framework for the Material Supply Chain Process (MSCP). The framework was based on various discussions and interviews with office and site personnel from the electrical contracting industry in Northern Virginia, Southwest Virginia, Tennessee, Maryland and Carolina. From the information acquired from the interviews, five distinct phases that comprise the MSCP were identified which are: 1-Bidding Phase, 2-Sourcing Phase, 3- Materials Procurement, 4-Costruction Phase, 5- Post Construction Phase. The following subsections will briefly discuss the five phases.

Bidding Phase: the materials management process starts from the time that the contractor receives the drawings and specifications. The materials takeoff and identification process is the first step in this phase and involves identifying the materials needed as well as any special requirements or special materials to be used in the project.

Sourcing Phase: This phase includes the selection of reputable suppliers and

manufacturers. Theselection of suppliers is critical and the contractor needs to verify that

the supplier is capable of delivering the right material (i.e. type, quality and quantity)

when needed (i.e. at dates specified).

Material Procurement Phase: this phase includes material requisition and expediting

and it is considered very critical to the success of a material management process. The

person in charge of procuring materials or the purchasing department, in the case of a

large company, needs to ensure that the correct materials in the correct quantities are

delivered. This person also needs to verify the release dates at which the material is

needed and to clearly specify those delivery dates and the location of delivery to the

supplier.

Construction Phase: material delivery usually occurs during the construction phase.

Material is generally requested for delivery to the jobsite. In some instances material

delivery to the jobsite may not be feasible due to storage or access limitations. In this

case, the material isdelivered to other locations such as the contractor’s warehouse, a

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greatly affect the construction stage and failure to manage this phase effectively could result in project disruption and possible delays due to late deliveries, stockouts due to small quantities bought, material delivered to the wrong locations, material backordered and effects in overall costs. The requisition process for miscellaneous material starts in the construction phase and is focused on how much material to buy, when to buy this material, where to deliver this material, when to deliver, which supplier to buy from, where to store on site.

Post-Construction Phase: after installation of the materials on the structure, the

contractor has to manage any surplus material. The surplus is handled differently

depending on the type of material and alsowhether or not the contractor has a warehouse.

If the company has a warehouse, thesurplus material is stored in the warehouse for use in

future projects. Other companies return surplus material to the supplier for

reimbursement.

Furthermore, Abdul Rahman and Al-Dirisy (1993) developed a framework that shows the activities involved in the management of materials on construction site. The following is a description of the activities:

1. Preparation of material purchase- this involves the description, quantity and

quality of the materials to be used, order and delivery dates and the location.

2. Order of materials- the preparation of a purchase order that describes the quantity,

quality, dimensions and location of delivery.

3. Transportation- this covers the loading and transit, handling and off-loading of

materials.

4. Delivery- site management should check the material delivery order against the

purchase order. Damages during the transit have to be spotted upon the arrival of materials.

5. Site material management- a record of the performance of the material vendor,

providing information on the materials needed and which manages the warehouse and distribution of the materials.

6. Comparison and evaluation- this activity involves comparing materials receipt

against orders and records on materials usage.

7. Materials handling- the duty of the foreman to oversee workmanship, overall

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8. Work implementation and monitoring- this include supervision of the work, the

use of proper instrument and check against wastage.

9. Work completed and acceptance- examination of the completed works, inspection

and request for remedial work. Once a task is completed and satisfactorily accepted by the client, an evaluation should be made to assess wastage/surplus and stock.

2.10. Problems of the Construction Supply Chains

Much research work and real test cases analyses have assessed that construction is ineffective and many problems can be observed. Analysis of these problems has shown that a major part of them are supply chain problems, originating at the interfaces of different parties or functions, as represented in Figure 2.3, among which (Vrijhoef et al., 2001):

• client/design interface: difficulties in finding out client’s wishes, changes of

client’s wishes, long procedures to discuss changes,

• design/engineering interface: incorrect documents, design changes, extended wait

for architect’s approval or design changes,

• engineering/purchasing & preparation interface: inaccurate data, engineering

drawings not fitting the use,

• purchasing & preparation/suppliers interface and purchase &

preparation/subcontractors interface: inaccurate data, information needs not met, adversarial bargaining and other changes.

It can be noticed from this list that communication problems (either described in terms of “data”, or more generally in terms of information handled during the exchanges) form an important part of the problems faced in construction supply chains. The current practice of supply chain management rightly suggests controlling the supply chain as an integrated value-generating flow, rather than only as a series of individual activities.

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Figure 2.3 Problems in Construction Supply Chain (Vrijhoef et al., 2001)

Furthermore, Dey (2001) noted that the common issues related to materials management are as follows (cited by Kasim et al, 2005):

• Receiving materials before they are required, causing more inventory cost and

chances of deterioration in quality;

• Not receiving the materials at the time requirement, causing loss of productivity;

• Incorrect materials takeoff from drawings and design documents;

• Subsequent design changes;

• Damage/loss of items;

• Selection of type of contract for specific materials procurement;

• Vendor evaluation criteria;

• Piling up of inventory and controlling of the same; and

• Management of surplus materials

2.11. Traditional Construction Supply Chain

Traditionally, project management in construction follows an activity-centered approach that concentrates on monitoring project participants’ activities against a construction schedule (Howell 1999). Since the underlying motivation of this approach is to improve efficiency in value-adding activities where physical conversions occur (Koskela 1992), passive communications from downstream (customer side) to upstream (supplier side) have been prevailing in the industry. However, due to the long information lead-time and

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the lack of coordination, the initiated communication often fails to have the required information in a timely manner. To make matters even worse, the communication itself may not be initiated because of the large number of project participants in a construction project: it is an overwhelming task for project managers to cover numerous project members and their suppliers. These types of disturbances in information flows generate turbulences in material flows, which are one of the highly ranked causes of delay in a

construction project. Furthermore, project information exchange between designers and

contractors has mainly based on paper documents (Luiten et al, 1998). These documents come in the form of architectural and engineering drawings, specification and bills of quantities and materials. This practice is far from being satisfactory, which research showing that about two-thirds of the construction problems are caused by inadequate communication and exchange of information and data (Cornick, 1990).

The most significant characteristic of this process is the project organization which has been described as a “temporary multiple organization” (Cherns and Bryant, 1983). Such an organization is usually project-focused, with a short-term perspective, emphasizing competitive bidding as the main tool in contractors, subcontractors and supplier evaluation. Consequently, customer-supplier relationships in construction are generally of the arms length type rather than being partnerships. Cox and Thompson (1997) concluded that competitive tendering assures that sub-contracting is procured to the lowest-price supplier with little or no guarantee (or even incentive) to future work.

In Brazil, the construction of the projects is often managed in the traditional way. The construction phase often begins with only a part of the designs complete, and the rest of them are completed during the construction. In additions to this, designs are mostly limited to what build, there is a little information about how to build. Unfortunately, this

erroneous way of thinking has resulted in many problems in the construction phase:

rework, constructability problems, delay caused by incomplete design or lack of congruency are daily problems on site (Villagarcia & Cardoso, 1999).

To overcome industry fragmentation, a number of integration approaches and strategies, and their successful applications in manufacturing and other industries have been recommended (Mohamed, 1997). These include design-and-construct, design-for-construction, concurrent engineering, lean design-for-construction, business process reengineering,

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and a variety of others. Unfortunately, these approaches have proved inadequate to cope with the increasing complexity of construction projects, without the support of information technology (Mokhtar and Bedard, 1995). Also, most of these approaches have tried to focus on elements linked to time, quality and/or cost, but research (Kagioglou et al, 1998) noted that 85% of commonly associated problems are process related, and not product related. Except for the most trivial projects, the delivery process for a constructed facility consists of several phases and a multitude of professionals from various disciplines working together to advance the project (Fischer et al, 1998).

2.12. Supplier/Contractor Arrangements

Unavailability of materials when needed can greatly affect the productivity of the workforce, thus causing delays to activities, increasing the cost of the project and possibly delaying the completion of the project. There is no doubt availability of materials when needed is critical for the successful completion of the project. The contractor should search for arrangements that will ensure availability of materials when they are needed. The construction industry has been characterized by adversarial relationships between the parties involved. Traditionally, the most common way in which the contractor gets most of his projects is by hard bid. Because of the competitive nature of hard bidding, the contractor needs to obtain materials and subcontractor’s services at the lowest cost possible. Usually, the contractors request bids from suppliers and subcontractors in order to get the lowest prices possible for their services and products. Suppliers or subcontractors will try to win the contract by offering a relative low price to the contractor. Sometimes the price offered might not be low enough to win the contract and the contractor could request a lower price. If the supplier or subcontractor does not lower the price, the contract might be awarded to another party. This bidding process might create adversarial relationships because the suppliers or subcontractors could get the job at a lower amount than what they originally were expecting; therefore they are making less profit. Because of this loss in profit, the supplier or subcontractor might not be totally devoted to this particular contract and some problems might arise (Perdomo, 2004). The relationship of a contractor with his suppliers is critical for the successful completion of any construction project. Availability of materials is essential for the timely completion

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of activities and for the productivity of the labor force. If materials are not available when they are needed, a variety of problems might arise. Leenders et. al. (2002) offer a classification of supplier based on the quality of the service that the supplier offers to the customer. The classifications that they present are unacceptable suppliers, acceptable suppliers, good suppliers, preferred suppliers, and exceptional suppliers. A description of each category follows.

• Unacceptable suppliers- these suppliers are not able to meet the operational needs

of the customer and are not able to provide materials when they are needed. In addition, they don’t offer means to satisfy the strategic needs of their customers.

• Acceptable suppliers- these suppliers meet the current operational needs of the

customer, however, the services that they provide can easily be matched by any other supplier.

• Good suppliers- these suppliers are a step above acceptable suppliers in the fact

that they can provide the materials needed, but in addition they can also provide some value added services.

• Preferred suppliers- these suppliers offer a system that integrates the

buying/selling functions in an electronic format. This integration eliminates duplication and allows to process transactions faster. These suppliers meet both the operational needs of the company as well as their strategic needs.

• Exceptional suppliers- these suppliers are able to recognize and anticipate the

needs of their customers and are able to satisfy those needs. Because of the value they provide to their customers, they are valued. They allow customers to experiment with different scenarios and approaches, because of their efficiency, which results in minimization of risk for their customers.

2.13. Construction Supply Chain Integration

In view of the above, there has been a growing recognition that it is important to integrate the various disciplines/participants in a construction project; this includes aspects of integrating all the members of the supply chain.

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2.13.1.Partnering

To minimize the risk of not having materials when they are needed, companies are recurring to set up partnering agreements with suppliers. Project partnering is an approach used to enable the different parties involved in a project to work cooperatively. Project partnering is a synergy- a cooperative, collaborative management effort among contracting and related parties to complete project in the most efficient, cost-effective method possible, by setting common goals, keeping lines of communication open and solving problems tighter as they arise. Perdomo (2004) defined partnering agreement as business relationship that looks forward to the benefits of the partners involved. A partnering agreement does not represent a legal partnership with the associated partners, instead it refers to an informal working agreement to maintain cooperative relationships. In such types of agreement, the decision process should be done in a win-win basis for all the parties involved. No benefits should be acquired by hiding information from other parties. A successful partnering relationship consists of trust, fairness and commitment from all the parties involved. Communication is a very important aspect in Partnering. Open and honest communication among team members is critical.

Leenders et. al. (2002) describes two different types of partners, basic and extended partners. They point out that all suppliers should be treated as basic partners with respect among parties, honesty, trust, open communication, and understanding of the aspects that drive their relationship. An extended partnership is only established with key suppliers. This type of agreement goes beyond basic partnering and is oriented on the goals of the supplier and customer. It is not uncommon to have a team, comprised from supplier/customer employees, to create plans for mutual success and profitability. Extended partnering has a long term view and improvement of both parties should be the main objective. Anderson (1994) defines some key elements of a Partnering agreement. A brief description of these elements follows.

• Commitment -All members of the team should commit to good faith and fair

dealings with the other partners

• Equity- When developing mutual goals and plans for the companies, the interest

of the stakeholders must be considered. If there are aspects that stakeholders don’t appreciate or think that are valuable, they won’t commit to the partnership agreement.

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• Communication- Open and honest communication is critical. Trust- Trust is

critical for resolution of issues. Information sharing among partners without fear is essential. Issue Resolution System- There must be a fair process for dispute resolution without finger pointing. These issues should be solved quickly and in a fair way.

• Evaluation- Meetings are needed to evaluate the work being performed by the

team. An assessment of work performed vs. work accomplished is essential to identify if the partnership agreement is working as expected.

One of the biggest benefits of a Partnering agreement is the elimination of adversarial relationships between contractors and suppliers. The cooperative environment between the parties minimizes the risk of unavailability of materials on the construction site when they are needed. In addition, the contractor will ensure that bills are paid as stated in the partnership agreement, which provides a better cash flow for the supplier. Another main benefit is the information sharing between parties, which can lead to the enhancement of one company’s competitive position by using the information and resources provided by the partner company (Perdomo, 2004).

2.13.2.Information and Communication System

There is a growing awareness of the value of information and communications technology to bring together the major parties in the construction process and share project as well as industry information in a meaningful way (Tucker et al, 2001). Thus, the coordination of information flows is a key component in achieving tight integration in order to optimize the chain-wide performance. As a way of coordinating information flows, the idea of real-time information sharing has been studied extensively in the manufacturing industry. It specifically emphasizes instantaneous multilateral information sharing within a supply chain in order to reduce uncertainties associated with operations and demand forecast (Cooper et al. 1997).

The concept of the a Web-Based information system is to utilize the internet and the technologies associated with the World Wide Web (as a publishing media) for global distribution of information using widely available technologies. With the Web-based information system, time requirements for transferring and checking information are

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